Is the 30% “apple tax” high? Experts say it’s a de facto monopoly
For Apple users, they can only download apps from App Store. In addition, to use these applications, they must go through Apple’s payment system. When consuming digital goods and virtual services, Apple will charge a 30% commission for businesses with annual revenue over $1 million. However, for companies with an annual revenue of less than $1 million, the company takes a 15% commission. Many consider this fee an “Apple tax”.
Regular users are also affected by the Apple tax. For example, membership fees for Apple users are generally higher than those for Android. This means that as Apple charges the merchant, it in turn charges users. The Apple tax has been a controversial topic around the world. In May this year, the European Union filed an antitrust lawsuit against Apple’s payment service. Elon Musk also complained on Twitter about Apple’s App Store commission mechanism. The Netherlands also regulates Apple’s tax.
30% is too high – constitutes a de facto monopoly
Liu Xingliang, dean of the DCCI Internet Research Institute, says the Apple tax has always been Apple’s cash cow. According to a CNBC analysis, if the commission rate charged by Apple is uniformly 30%, App Store revenue in 2021 will reach up to $85.71 billion. If Apple’s commission is consistently 15%, App Store revenue last year will reach $70.58 billion.
“Personally, I think 30% is high. I also run a business myself, and the profit is not necessarily 30%. It is still very high when the intermediary takes 30%”. said Liu Xingliang.
Zhang Guobin, CEO of Electronic Innovation Network, and Feng Yueping, senior partner of Beijing Jingshi law firm, also share this view. Feng Yueping believes that the 30% ratio is ridiculously high, killing some companies’ living space. These companies will also have to pay other taxes. If these companies are not making a profit, how can they innovate?
Apple’s 30% commission is not a crime in China
He points out that the compulsory use of the Apple payment system and the 30% commission constitute a de facto monopoly. However, from a Chinese legal point of view, it does not constitute a monopoly. According to Article 3 of China’s Anti-Monopoly Law, monopolistic behavior generally refers to three types of economic monopoly, including
- monopoly agreement
- Abuse of dominant market position
- Having or being able to have the effect of excluding or restricting the concentration of competition between operators.
Liu Xingliang believes that there are no such precedents in China at the moment, but there are many cases around the world. For example, South Korea has enacted the “Electronic Communication Business Law”, which clearly states that app stores such as Apple’s App Store cannot force developers to use its internal payment method. The European Union’s “Digital Markets Act” has also been passed. Thus, the law stipulates that smartphone users must have the freedom to freely use payment methods. In the Netherlands, the government sees Apple’s behavior in the App Store as an outright monopoly.
“The judgment of the Netherlands makes a big reference to China, but there is still a long way to go. You have to ask yourself if the law and the market are mature. said Feng Yueping.
Zhang Guobin also points out that currently there are no specific provisions in China’s anti-monopoly law that can target the Apple tax. He suggests that relevant departments still need to issue specific regulations as soon as possible. South Korea, the European Union and other countries and regions have set a good example.
Has Apple’s innovation declined?
Relying on the Apple tax, the company makes a lot of money. At the same time, there are some controversies about Apple, such as the view that Apple’s innovation in the Cook era is in decline.
Zhang Guobin thinks that different people have different understanding of innovation, and it is very difficult to do disruptive innovation with the development of technology. Apple in the Cook era still made a lot of innovations, such as computational photography, 3D structured light and other technologies. Apple Watch and AirPods were all launched in the Cook era, creating a new industry.
“Chinese manufacturers’ fast charge may be 120W, while Apple is still 20W. In this comparison, it seems that Apple has no innovation. But in fact, Apple still has a lot of technology in storage, and has done medical layout many years ago, including VR”. Also, Apple does not have many flaws in product manufacturing. Although some item may not be so high , the average score and the overall ability are relatively high.The overall experience is also better.
Different business model
Many people will want to compare Apple with Android brands. However, Liu Xingliang believes that these brands all have different business models. Chinese brands have big progress on some technologies and Apple has been slow with 5G and foldable smartphones, Apple has a strategy of explosive models. Apple does not come out with particularly mature solutions, but Android’s tactics are quite different. “In a single event, Apple may not win the championship, but it is an all-around champion, and the overall experience is very good.”
In the past two years, many Chinese manufacturers have also offered to compare themselves with Apple. According to Liu Xingliang, Chinese manufacturers should pay attention to R&D investment. He thinks that if there is too little investment in R&D, it won’t work. In addition, electronic products are deparameterized, and some manufacturers still do not. Liu Xingliang believes that many Chinese brands have a lot to learn from Apple’s comprehensive experience.